DTI frees tenants from beer contracts

A flotation of Inntrepreneur moved a step closer yesterday as the Department of Trade & Industry released the company, one of the UK's largest chains of pubs, from a raft of restrictions and freed its tenants from their obligation to buy beer only from Scottish & Newcastle.

The deal, which was welcomed by Inntrepreneur's chief executive, Mike Foster, should allow numerous legal rows between Inntrepreneur and its tenants to be resolved, clearing a stumbling block to a stock market listing. Analysts said they expected Inntrepreneur, which owns 2,900 pubs, to come to the market with a price tag of about pounds 800m.

Inntrepreneur was formed in 1989 when Foster's, which then owned Courage, acquired the brewing interests of Grand Metropolitan and a joint venture company was created to hold the two companies' pub estates. Following a Monopolies and Mergers Commission investigation of the deal in 1990, undertakings were made to reduce the vertical links between the Courage brewing company and the estate and to reduce the geographical concentration of pubs tied to Courage.

Yesterday's decision by the DTI means Inntrepreneur is no longer required to limit its estate to 4,350 pubs, is no longer limited to 20 per cent of the pubs in any petty sessional district and is no longer required to free any pubs it still owns from tie by next year.

In exchange it must allow its tenants to buy beer from brewers other than Scottish & Newcastle, the current owner of Courage, in a move which is expected to reduce tenants' costs considerably. Discounts for barrels of beer have widened in recent years thanks to the increasing buying power of independent chains such as Greenalls and JD Wetherspoon, but Inntrepreneur tenants have largely missed out on the downward trend in prices because of their onerous tie to Scottish & Newcastle.

Mr Foster said: "Inntrepreneur has now been given the opportunity to operate on the same playing field as other independent pub companies."

Announcing the change, John Taylor, Minister for Corporate and Consumer Affairs, said: "I have agreed that Inntrepreneur should be released from the existing undertakings. Inntrepreneur's estate is considerably smaller than at the time the undertakings were introduced. In addition to this, the operation of pub chains has become clearer since the time of the merger. Pub chains can stimulate competition, providing a counter-balancing force to the selling power of the large brewers."

Referring to the ongoing legal rows between Inntrepreneur and its tenants, he said: "I recognise that there has been some friction between Inntrepreneur and its tenants. I welcome the recent issue of a Code of Practice covering Inntrepreneur's relationship with its tenants, which has demonstrated the company's desire to resolve these differences. I am sure that Inntrepreneur will respond to this decision in a similar spirit, seeking to foster relationships with its tenants."

The decision to allow Inntrepreneur to extend its tie beyond 1998 is certain to anger some tenants who have alleged inflated beer prices as a result of the current tie agreement.